A letter in the mailbox with the IRS as the return address is sure to raise your blood pressure. Here are some tips for handling the situation if this happens to you:
Stay calm. Try not to overreact to the correspondence. They are often in error. This is easier said than done, but remember the IRS sends out millions of notices each year. The vast majority of them correct simple oversights or common filing errors.
Open the envelope. You would be surprised at how often people are so stressed by receiving a letter from the IRS that they cannot bear to open the envelope. If you fall into this category, try to remember that the first step in making the problem go away is to simply open the correspondence.
Carefully review the letter. Understand exactly what the IRS thinks needs to be changed and determine whether or not you agree with its findings. Unfortunately, the IRS rarely sends correspondence to correct an oversight in your favor, but its assessment of your situation is often wrong.
Respond timely. The correspondence should be very clear about what action the IRS believes you should take and within what timeframe. Delays in responses could generate penalties and additional interest payments.
Get help. You are not alone. Getting assistance from someone who deals with this all the time makes going through the process much smoother.
Correct the IRS error. Once the problem is understood, a clearly written response with copies of documentation will cure most of these IRS correspondence errors. Often the error is due to the inability of the IRS computers to conduct a simple reporting match. Pointing the information out on your tax return might be all it takes to solve the problem.
Use certified mail. Any responses to the IRS should be sent via certified mail. This will provide proof of your timely correspondence. Lost mail can lead to delays, penalties and additional interest on your tax bill.
Don’t assume it will go away. Until a definitive confirmation that the problem has been resolved is received, you need to assume the IRS still thinks you owe the money. If no correspondence confirming the correction is received, a written follow-up will be required.
With competition abounding for virtually every product or service, businesses need to hone every advantage available to them. One of the ways you can set your business apart from the pack is to create an awesome customer experience starting with the first interaction that continues through the entirety of the relationship. How does one foster this level of customer service? Here are four steps to help you get there:
Make a great first impression. The first impression a potential customer gets about your business can come from many different avenues. Strive to make all of them impressive. Is your website fresh? Are your customer service reps easy to talk to on the phone? Does your social media offer timely, relevant information? Is your lobby clean and organized? All details matter. A poor initial impression may drive your potential customer to the competition without a second thought.
Manage the outcome. With every customer interaction, there are three potential outcomes: positive, negative and neutral. In all cases, your goal must be to leave them feeling positive about your business. Unfortunately, many businesses limit themselves by removing the positive outcome right off the bat. For example, assume you receive a call from a customer looking to hear about a new service. The employee that handles the service is not available and you are limited in your knowledge. The worst thing you can say is, “I’m sorry, the person responsible for the service is not here at the moment.” In the customer’s mind, you immediately removed the possibility of a positive outcome! Instead, engage the customer to hear about their needs, gather as much information as possible and commit to finding the answers for them and calling them back immediately.
Search for useful feedback. No matter how well you strive to offer top-notch customer service, there will always be some instances that are less than favorable. Oftentimes, customers are more than willing to tell you about it, but you need to have a system in place if you want to hear the story in a helpful way. This can be as simple as response cards at the front desk or an automated email campaign looking for feedback. Encourage loyal customers to let you know how you are doing so you get a holistic view of your performance.
Turn problems into opportunities. Knowing your strengths can reaffirm your approach and help you set customer service performance goals. On the other hand, learning about a bad experience from a customer’s perspective will give you great insight into how you can improve. Use these problems to focus your activity. Over time the results of this continual improvement can have a tremendous impact on your business.
Creating a culture that excels at customer service is attainable if you put in the effort to know your customer’s needs and understand that every impression matters!
If you have a child in college or entering college during the next school year, you need to read this. You can now fill out your required Free Application for Financial Student Aid (FAFSA) for the next school year.
FAFSA application timeframe
The Free Application for Federal Student Aid (FAFSA) process opened on Oct. 1.
The time to file is now
The earlier you file your application, the earlier you will receive aid packages from most participating schools. The application is used to receive grants, federal loans and work study awards. Here are some hints to ensure the application process works in your favor:
Create your FSA ID. If you have not already done so, both the student and a parent will need to set up a Federal Student Aid (FSA) ID (username and password) within the FAFSA system. You cannot submit the FAFSA form without first doing this.
File the FAFSA early! As soon as possible, fill out and submit your FAFSA. Filing early maximizes your chances of receiving aid. It also minimizes your chances of missing an unknown application deadline.
Use your tax records. Because the year is not yet over, you can use last year’s (2018) tax information when filling out the application. There are IRS tax return data retrieval tools within the online application to automate this process.
Talk to your advisors. If you have a child ready to attend college, stay in touch with both your financial advisor and your school advisor. A financial advisor is used to help manage your assets to present a good financial picture starts before your student’s junior year in high school. The school advisor is a great resource to help you find potential sources of money.
Collect the right info.To fill out a FAFSA you will need the following:
Social Security number
Alien registration number (if not a U.S. citizen)
Federal tax information
Record of any nontaxable income (excluding retirement account balances)
Balances of the following:
Cash, savings and checking accounts
Investment asset balances
Other assets
FSA ID
Filling out the form can be a daunting task for the uninitiated, but with proper preparation you can get your form done in quick order.
It’s easy to push tax planning to the sidelines when tax laws are ever-changing and hard to understand. Here are some common (but often unfounded) reasons for avoiding tax situations, plus tips to help get past them and start paying less tax this year:
It doesn’t make a difference. This point of view is especially problematic in years with unique situations. Even in uneventful years, external forces like new tax laws can be managed if planned for in advance.
Selling a house? You can avoid taxes if primary residence requirements are met.
Starting a business? Choosing the correct entity can save you a bunch of taxes.
Getting ready to retire? Properly balancing the different revenue streams (part-time wages, Social Security benefits, IRA distributions and more) has a huge impact on your tax liability.
It’s out of your control. Timing is important when it comes to minimizing taxes, and the timing is often in your control. Bundling multiple years of donations into one to get a deduction, holding investments over one year to get a lower tax rate, and making efficient retirement withdrawals are just some examples of prudent tax strategies that you control.
There’s not enough money. There are tax strategies to be implemented at all income levels, not just those at the top of the tax bracket. Tax deductions are available for student loan interest, IRA contributions and others even if you claim the standard deduction. Certain tax credits (called refundable credits) will increase your refund even if you don’t owe taxes. Missing any of these tax breaks can unnecessarily increase your taxes.
I only need help at tax time. When the standard deduction doubled in 2018, many people assumed they could kick their feet up and wait for a big refund. That assumption proved to be false for a large number of taxpayers when their refunds came in lower than expected or turned into a tax bill. Don’t let this happen to you! Every year has it’s own set of changes and challenges that you should plan for well before tax time rolls around.
It’s too overwhelming. Tax planning is often as simple as looking for ways to reduce taxable income, delay a tax bill, increase tax deductions, and take advantage of all available tax credits. The best place to start is to bolster your level of tax knowledge by picking up the phone and asking for assistance.
Thankfully, it’s not too late to get on track for 2019. If you haven’t scheduled a tax-planning meeting, now is a great time to do so.
A sad and oft-repeated truth is that half of all new businesses fail within the first five years. Although many factors contribute to business failure, a common culprit is poor cash management. All businesses, large and small, must deal with the uncertainty of fluctuating sales, inventories and expenses. Follow these practices to moderate the ebb and flow of cash in your business:
Analyze cash flow. If you don’t know it’s broken, you can’t fix it. The starting point for any meaningful action to control cash is discovering where the money’s coming from and where it’s going. Get a handle on cash by monitoring your bank accounts for at least one complete business cycle; then use that information to establish a realistic forecast. This should be done throughout the year to help you understand your seasonal cash needs.
Monitor receivables. Extending credit to risky customers, failing to identify late payers, refusing to collect payment on a timely basis — these practices amplify cash flow problems. Mitigate receivable fluctuations by generating aging reports. Use the report to follow up when payments are late. You may even wish to offer discounts to customers who pay early.
Slow down payments. Prudent cash flow management dictates that you retain cash as long as possible. So pay your vendors on time — not too early. Of course, if suppliers offer discounts for early payment, take advantage of cost savings whenever possible. Also consider negotiating with suppliers to extend payment terms.
Time large expenses. If you know a property tax payment is due in May, start setting aside money in a separate fund in October. The same holds true for any large payment that comes due during the year. If your equipment is nearing the end of its useful life or your roof is showing signs of wear, start saving now. Don’t let big expenditures catch you by surprise.
By taking these steps and endeavoring to smooth out cash fluctuations, proficient managers keep their companies strong throughout the business cycle.
According to the Federal Reserve, U.S. student loan debt is now $1.5 trillion with more than 44 million borrowers. Only mortgage debt currently has bigger numbers among types of consumer debt. Even worse, more than 10 percent of these loans are past due. Here are some tactics to help make student debt easier to manage:
Know the loan terms. Not all student debt is created equal. Understanding the terms of all your student loans is important. With this knowledge, select the correct loan option and know which loan to pay first. Things you should know about each loan include:Suggestion: Create a spreadsheet with a student loan in each column. Then note the terms under each loan. This will create a strong visual of your situation and show you which loans are most important.
The interest rate
The term of the loan
Amount of any up front fees
Pre-payment penalties (if any)
When interest and payments start
Payment amounts
Payment flexibility
How the interest is calculated
Avoid accruing interest. Some student loans accrue interest while you are in school. With the compounding of this interest, your student loan amount continues to grow with each passing year before repayment begins. Banks love this – you should not. Suggestion: Figure out how to make some or all of the interest payments while in school. This will not only lock the amount you owe, it will reduce the amount of overall loan payments.
Pay a little extra in the early days. The math of loans benefits banks in the early years of the repayment period. This is because the vast majority of interest is paid in the first years of repayment. By the time you get to the last year of repayment, payments are primarily the principal balance and interest is nil. Suggestion: Pay extra every month as soon as payments start. While this seems impossible as you enter the workforce, even $25 extra per month can dramatically reduce the amount of total payments you make over the life of your loan. For example, a $25 extra payment on a 10-year $50,000 student loan with 5 percent interest would cut six months off the loan, save $834 in interest, AND save $3,180 in future loan payments!
Make small cuts elsewhere. Having a hard time finding a few extra dollars to make extra payments? Consider observing and then changing your spending habits. Suggestion: Purchase one less latte a week. Drop one monthly service from a bill. Eat in more often. Then use these savings as a bonus payment on your student loan principal.
While student debt is often an unavoidable outcome of getting a college education, it can be minimized if actively managed. Small changes can yield results if planned for in advance.
Wages and self-employment earnings are taxable, but what about the random cash or financial benefits you receive through other means? If something of value changes hands, you can bet the IRS considers a way to tax it. Here are five taxable items that might surprise you:
Scholarships and financial aid. Applying for scholarships and financial aid are top priorities for parents of college-bound children. But be careful – if any part of the award your child receives goes toward anything except tuition, it might be taxable. This could include room, board, books, travel expenses or aid received in exchange for work (e.g., tutoring or research). Tip: When receiving an award, review the details to determine if any part of it is taxable. Don’t forget to review state rules as well. While most scholarships and aid are tax-free, no one needs a tax surprise.
Gambling winnings. Hooray! You hit the trifecta for the Kentucky Derby. But guess what? Technically, all gambling winnings are taxable, including casino games, lottery tickets and sports betting. Thankfully, the IRS allows you to deduct your gambling losses (to the extent of winnings) as an itemized deduction, so keep good records. Tip: Know when the gambling establishment is required to report your winnings. It varies by type of betting. For instance, the filing threshold for winnings from fantasy sports betting and horse racing is $600, while slot machines and bingo are typically $1,200. But beware, the gambling facility and state requirements may lower the limit.
Unemployment compensation. Unfortunately the IRS doesn’t give you a break on the taxes for unemployment income. Unemployment benefits you receive are taxable. Tip: If you are collecting unemployment, you can either have taxes withheld and receive the net amount or make estimated payments to cover the tax liability.
Crowdfunding. A popular method to raise money for new ventures or to support a special cause is crowdfunding through websites. Whether or not the funds are taxable depends on two things: your intent for the funds and what the giver receives in return. Generally, funds used for a business purpose are taxable and funds raised to cover a life event (e.g., special causes or medical assistance) are considered a gift and not taxable to the recipient. Tip: Prior to using these online tools to raise money, review the terms and conditions and ask for a tax review of what you are doing. If you need to account for taxes, reserve some of what you raise for this purpose.
Cryptocurrency. Cryptocurrencies like Bitcoin are considered property by the IRS. So if you use cryptocurrency, you must keep track of the original cost of the coin and its value when you use it. This information is needed so the tax on your gain or loss can be properly calculated. Remember, the tax rate on property can vary if you own the cryptocurrency more than a year, so record all dates. Tip: For those considering replacing cash with things like Bitcoin, you need to understand the gain or loss complications. For this reason, many people using cryptocurrency do so for speculative investment purposes.
When in doubt, it’s a good idea to keep accurate records so your tax liability can be correctly calculated and you don’t get stuck paying more than what’s required. Please call if you have any questions regarding your unique situation.
Very few things in life can create a higher degree of stress than having your Social Security Number (SSN) stolen. This is because, unlike other forms of ID, your SSN is virtually permanent. While most instances of SSN theft are outside your control, there are some things that you can do to minimize the risk of this ever happening to you.
Never carry your card. Place your SSN card in a safe place. That place is never your wallet or purse. Only take the card with you when you need it.
Know who needs it. As identity theft continues to evolve, there are fewer who really need to know your SSN. Here is that list:
The government. The federal and state governments use this number to keep track of your earnings for retirement benefits and to ensure you pay proper taxes.
Your employer. The SSN is used to keep track of your wages and withholdings. It also is used to prove citizenship and to contribute to your Social Security and Medicare accounts.
Certain financial institutions. Your SSN is used by various financial institutions to prove citizenship, open bank accounts, provide loans, establish other forms of credit, report your credit history or confirm your identity. In no case should you be required to confirm more than the last four digits of your number.
Challenge all other requests. Many other vendors may ask for your SSN but having it may not be essential. The most common requests come from health care providers and insurance companies, but requests can also come from subscription services when setting up a new account. When asked on a form for your number, leave it blank. If your supplier really needs it, they will ask you for it. This allows you to challenge their request.
Destroy and distort documents. Shred any documents that have your number listed. When providing copies of your tax return to anyone, distort or cover your SSN. Remember, your number is printed on the top of each page of Form 1040. If the government requests your SSN on a check payment, only place the last four digits on the check, and replace the first five digits with Xs.
Keep your scammer alert on high. Never give out any part of the number over the phone or via email. Do not even confirm your SSN to someone who happens to read it back to you on the phone. If this happens to you, file a police report and report the theft to the IRS and Federal Trade Commission.
Proactively check for use. Periodically check your credit reports for potential use of your SSN. If suspicious activity is found, have the credit agencies place a fraud alert on your account. Remember, everyone is entitled to a free credit report once a year. You can obtain yours on the Annual Credit Report website.
Replacing a stolen SSN is not only hard to do, it can create many problems. Your best defense is to stop the theft before it happens.
Your business’s ability to retain customers is one of the most important components to sustain growth and profitability. Here are the three retention questions every business owner should be able to answer:
What percentage of your customers return each year? The first step to understanding retention is to know your customer retention rate. First, take your total customers from the end of a period and subtract the total customers you added during the period. Then, take that number and divide it by the total customers from the start of the same period. The result is your retention rate for that period. That rate by itself doesn’t tell you much, so you need to compare it to the same time period last month and for prior years. A rising rate means you are on the right track; a shrinking rate means you need to make changes. According to the Harvard Business Review, a 5 percent increase in your retention rate increases profits by 25-95 percent! Example: Cut’em Nail Salon starts the year with 700 active clients. They add 300 new customers during the year, and their active client base is 800 at the end of the year. On the surface things look good, right? This increase of 100 clients is over 14 percent! But when you calculate the retention rate, it is 71.4 percent (800 clients minus 300 new clients means 500 of last year’s clients still use Cut’em. 500 divided by 700 equals 71.4 percent). But Cut’em doesn’t know if this is good or bad news, as it only makes sense when comparing it to the last few years’ retention performance.
What percentage of your revenue comes from returning clients? Core customers almost always contribute the most to your profitability. But how much? To figure out your returning customer revenue percentage, start with a list of revenue by customer for the last 12 months. Identify the returning customers and add up revenue attributed to them. Divide that number by your total revenue. Use this information to balance your spending between new customer acquisition and retaining your core customers. If you are like most businesses, you will realize there is tremendous value in spending more time and effort on retention, even when your business is full! Part 2 Cut’em Nail Salon Example: Assume the nail salon’s total revenue is $1 million and the revenue from the 500 returning clients is $900,000. In this case, the core customers represent 90 percent of the revenue but only 62.5 percent (500 divided by 800) of the customers!
Do you know who your most valuable customers are? Now identify which customers spend the most and buy the most often. Odds are, many of your top customers have similar characteristics. In the end, your goal should be to keep these customers happy and get more just like them! Part 3 Cut’em Nail Salon Example: In the example above, the average revenue per client is $1,250 per client or over $100 per month ($1 million divided by 800 clients). If the top 20 clients represent $100,000 in revenue or $5,000 per client, you can quickly see how important they are!
Don’t make the mistake of assuming business success comes from constantly adding new customers. Most sustained growth and profitability comes from first understanding marketing activities targeted to keep your current customers. The best place to start is to calculate and understand your base retention numbers.
Whether you are hiring for the first time, filling an open position, or conducting annual performance reviews, finding a salary range that attracts and retains valued employees can be a difficult task. Here are some suggestions to help make the process a bit easier for you and your company:
Know what your business can afford. Like any business expense, you need to know how it will affect your budget and cash flow. Make a twelve-month profitability and cash forecast and then plug in the high end of the annual salary range you are considering to see if it’s something your business can absorb. After all, the greatest employee in the world can’t help you if you don’t have the money to pay them. Don’t forget to account for increases in benefit costs, especially the escalating cost to provide healthcare. Once you establish a budget, you can allocate your spending plan to your payroll.
Understand the laws. In general, the federal government sets the minimum requirements (minimum wage of $7.25 per hour, overtime rules and record keeping requirements). States and localities often add their own set of rules. For example, the state of Illinois, Cook County and the city of Chicago all have different minimum wage requirements. If you are located in Chicago you need to adhere to the highest rate. So research all payroll rules that apply to your location at the beginning of the process. When reviewing the rules, don’t forget that different rules often apply depending on the number of employees in your business.
Review and update job descriptions. Take some time to review key jobs and update them as appropriate. With new positions, note the exact tasks and responsibilities you envision for the role. Then, think about the type of person that will succeed performing these responsibilities. Once you have a clear picture of who you are looking for, you can begin to build a detailed job description and narrow in on a specific salary range.
Establish value ranges and apply them. Value is key when determining the perfect salary amount. Define the range of value for the position and then apply that valuation to the current person’s performance within the defined pay range. Use websites and recruiters to establish the correct range of pay, then apply experience and employee performance to obtain a potential new salary amount. Remember, size of company, location and competitiveness of the job market are all factors to consider.
Factor in company benefits. A strong suite of employee benefits is a powerful tool to couple with a competitive salary. Don’t be afraid to communicate their value to prospective and current employees (they help with retention, too!). According to Glassdoor, health and dental insurance are the most important, but flexibility is close behind – over 80 percent of job seekers take flexible hours, vacation time and work-from-home options into consideration before accepting a position.
Finding the right salary can be tricky, but with some preparation and research, you can find the balance that satisfies the needs of your business and your employees.
